GBP/USD seen receding to the 1.2320 area – UOB

In light of the recent price action, Cable could now extend the decline to the 1.2320 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our view for GBP to weaken yesterday was correct, our expectation for the weakness to ‘test 1.2500’ was not as it plunged to a low of 1.2403. While the rapid drop is oversold, there is no sign of stabilization just yet. From here, only a move back above 1.2500 would indicate that the current weakness has stabilized (minor resistance is at 1.2460). Until then, GBP could continue to weaken towards 1.2365. For today, the next support at 1.2320 is not expected to come under threat.”

Next 1-3 weeks: “The sudden lurch in GBP that sent it reeling by -1.03% (NY close of 1.2429) came as a surprise. The break below the bottom of our previously expected 1.2420/1.2710 range coupled with the sharp drop suggest that a deeper pullback in GBP is in the offing. From here, GBP is expected to stay under pressure unless it can move above 1.2550 (‘strong resistance’ level). Until then, GBP could decline towards 1.2320, possibly as low as 1.2270. Overall, the current weak phase in GBP is viewed as a deeper pullback and not the start of a major reversal.”